U.S. stocks tumble to one-year lows

Selloff takes indexes through key levels; declines are broad

LauraMandaro

SAN FRANCISCO (MarketWatch) — U.S. stocks dropped in a rough start to October, sending the indexes to their lowest closing levels since September 2010, as worries over Greece’s debt crisis overwhelmed a report showing slightly stronger U.S. manufacturing activity.

The Dow Jones Industrial Average
DJIA, +0.08%
dropped 258.08 points, or 2.4%, to close at 10,655.30. The decline was led by an 9.6% drop in Bank of America Corp.
BAC, -0.75%
shares.

The Dow lost 6% for the month of September, its fifth straight monthly loss, and 12% for the quarter, its worst since March 2009.

The index tumbled at Monday’s start on worries that Greece would fail to get its next round of bailout aid on time, bringing the country closer to default, then shot up as much as 66 points after the release of better-than-expected Institute for Supply Management data.

The selloff, once it resumed, was broad. Decliners outpaced gainers on the New York Stock Exchange by nearly 10 to 1. NYSE composite volume amounted to 5.91 billion, the largest volume day since Sept. 22 and surpassing the year’s daily average of 4.34 billion shares.

On the Nasdaq, about 13 stocks declined for every gainer, with composite volume of 2.55 billion shares, also above the year’s daily average.

U.S. stocks extended their European counterparts’ downward momentum, with the Stoxx Europe 600 index (SXXP) closing down 1.1%, after Greece said it would miss its deficit target this year. Read more on Greece.

Additionally, the leader of euro-zone finance ministers, Luxembourg’s Jean-Claude Juncker, reportedly said Monday his group will not reach a decision today on whether or not to give Greece its next installment of aid. Read more on Juncker.

Worries over a possible sovereign debt default in Europe, which could avalanche into major losses among banks and a sharp contraction in lending, have rattled global stock markets for the last several months.

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Jason Pride, director of investment strategy at Glenmede Investment and Wealth Management, said the market is exhibiting volatility as investors try to predict policy moves, a tendency that was triggered by the U.S. debt downgrade over the summer. Pride said markets run much more smoothly when economic data triggers moves, but predicting policy is sidelining the focus on data like the ISM.

“It’s a little hint that maybe things aren’t quite as bad but we need more data going that way,” Pride said.

The ISM said its manufacturing index rose to 51.6% in September from 50.6% in August. Economists polled by MarketWatch had anticipated an unchanged reading. Read more on the ISM data.

Technical breakdown

The S&P 500
SPX, +0.04%
closed down 32.19 points, or 2.9%, at 1,099.23, led by a 4.5% drop in financial stocks. The index had hit an intraday high of 1,138.99 and an intraday low of 1,098.92, undercutting its Aug. 9 intraday lows in the final minutes of the session.

Analysts have been watching the 1,120 to 1,220 range for the last several weeks, and professional money managers have tended to shrug off volatile intraday moves within that range.

“There’s been a real tug of war. The market has been engendering a false sense of security that the lows had been in,” said Richard Ross, global technical strategist at Auerbach Grayson & Co. He said

“If you got a weekly close below 1,120, that would strongly suggest there’s further to go on the downside,” he said. Investors trading in the direction of the break could send the index down 10%, he added.

The Nasdaq Composite
COMP, -0.23%
declined 79.57 points, or 3.3%, to 2,335.83, after reaching an intraday high of 2,430.88.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.